Concerns over domestic indicators amid FPI pullout

Mumbai | Published: November 7, 2018 12:20:27 AM

Big domestic investors have also faced trouble in the past two months. MFs have experienced a sizeable decline in their asset base due to sudden liquidity crunch in the market in the wake of the IL&FS episode.

Concerns over domestic indicators amid FPI pullout

By Utsav Saxena

Sell-off by foreign portfolio investors (FPIs) in the Indian capital market has intensified with outflows crossing the Rs 1 lakh-crore-mark since April, raising concerns over the weakening domestic economic indicators and adverse external factors.

The month of October recorded the highest ever monthly sell-off after FPIs pulled out a massive Rs 31,984 crore. The high outflows have directly affected the debt utilisation limits. Since June, long-term G-secs utilisation limits have declined from 69.5% to 46.4%. The total government securities limit has also declined by almost 7% in the same period and currently stands at 72.98%.

Speaking on the situation, RBI deputy governor BP Kanungo said: “FPIs have cited lack of information and financial position of state between two budgets and opacity of state govt operation as main reason for lackluster interest in SDLs despite the yields that they have to offer. There is, hence, a need to reach out to investors by introducing transparency and making accessible high frequency date in state finances in public domain.”

Big domestic investors have also faced trouble in the past two months. MFs have experienced a sizeable decline in their asset base due to sudden liquidity crunch in the market in the wake of the IL&FS episode. According to the Association of Mutual Funds in India (Amfi) data, assets under management (AUM) of MFs fell 12.6%, or over `3 lakh crore, to `22 lakh crore at September-end against `25.20 lakh crore at August-end due to massive outflows from liquid funds and income schemes.